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2009 State of the Market Report

Demand Response

peak to off-peak period, flattening the load curve). This increases the overall efficiency and reliability of the system.


DR Resources in the Midwest ISO

At year-end 2009, the Midwest ISO had over 12,000 MW of demand response capability. Most of this is through legacy “reliability” DR programs locally administered by LSEs, either through load interruption (known as Load-Modifying Resources, or “LMR”) or through Behind-the- Meter Generation (“BTMG”). These resources are beyond the control of the Midwest ISO and effectively reduced the overall load that the system met. DR resources under the control of the Midwest ISO are classified as Demand Response Resources (“DRR”) and participated in all Midwest ISO markets in 2009, including satisfying LSEs’ resource adequacy requirements under Module E of the Tariff. The launch of ASM provided additional avenues for DR participation in Midwest ISO markets.


Types of DRR

The Midwest ISO characterizes DRR that participate in the Midwest ISO markets as either DRR- Type I or DRR-Type II resources. Type I resources are capable of supplying a fixed, pre- specified quantity of energy or contingency reserves through physical load interruption. Conversely, Type II resources are capable of supplying varying levels energy or operating reserves on a 5-minute basis, such as through controllable load or behind-the-meter generation.

Because Type I resources are inflexible – they either provide no response or their “Target Demand Reduction Amount” – they cannot set prices in the Midwest ISO markets. In this respect, the Midwest ISO treats Type I resources in a similar fashion as generation resources that are block-loaded for a specific quantity of energy or operating reserves. The Midwest ISO is pursuing an initiative to develop an appropriate pricing methodology to allow Type I and other so-called “fixed block” offers to establish market prices. Although 17 units were capable of providing almost 2.4 GW of total Type I capacity in 2009, peak participation totaled just 340 MW. The capacity dropped substantially after September 1, 2009 because pumped storage resources that had been the largest provider of DRR Type I stopped participating as such.

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